IDEAS home Printed from https://ideas.repec.org/a/eme/afrpps/afr-09-2020-0140.html
   My bibliography  Save this article

Illusion of control in farmers’ investment and financing decisions

Author

Listed:
  • Katarina Labajova
  • Julia Höhler
  • Carl-Johan Lagerkvist
  • Jörg Müller
  • Jens Rommel

Abstract

Purpose - People’s tendency to overestimate their ability to control random events, known as illusion of control, can affect financial decisions under uncertainty. This study developed an artifactual field experiment on illusion of control for a farm machinery investment. Design/methodology/approach - In an experiment with two treatments, the individual farmer was either given or not given a sense of control over a random outcome. After each decision, the authors elicited perceived control, and a questionnaire collected additional indirect measures of illusion of control from 78 German farmers and 10 farm advisors. Findings - The results did not support preregistered hypotheses of the presence of illusion of control. This null result was robust over multiple outcomes and model specifications. The findings demonstrate that cognitive biases may be small and difficult to replicate. Research limitations/implications - The sample is not representative for the German farming population. The authors discuss why the estimated treatment effect may represent a lower bound of the true effect. Originality/value - Illusion of control is well-studied in laboratory settings, but little is known about the extent to which farmers’ behavior is influenced by illusion of control.

Suggested Citation

  • Katarina Labajova & Julia Höhler & Carl-Johan Lagerkvist & Jörg Müller & Jens Rommel, 2021. "Illusion of control in farmers’ investment and financing decisions," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 82(4), pages 675-689, September.
    • Handle: RePEc:eme:afrpps:afr-09-2020-0140
    DOI: 10.1108/AFR-09-2020-0140
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/AFR-09-2020-0140/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: no
    File URL: https://www.emerald.com/insight/content/doi/10.1108/AFR-09-2020-0140/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: no
    File URL: https://libkey.io/10.1108/AFR-09-2020-0140?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:afrpps:afr-09-2020-0140. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.